Tuesday, 20 September 2011

Telekom Austria's M2M launch (and others like it) threaten Vodafone's partner arrangements

Telekom Austria has announced the establishment of a dedicated M2M business unit. The press release is here. I don't really need to regurgitate what's in that, particularly as the launch was trailed back in June/July. However, I am intrigued by a number of the issues associated with this launch. Most particularly the change it may herald in relations between Vodafone and some of its partner operators as their interest in M2M grows.

Up until now the major noise in the M2M market has been made by the big boys. Vodafone, OBS, AT&T, VZW, Telenor (OK, so they're not huge in Europe but their Asian assets mean they're #7 in the world by subscribers) etc. The TA announcements indicates that they want to be taken seriously in this space. I'm sure other mid-tier MNOs will follow suit.

And it makes sense to do so. Clearly there's some money to be made from M2M. The question is whether the smaller players will lose out at every turn to the big boys? Well, yes and no. In some applications all that matters is national coverage. Smart metering being the prime example. TA will, I'm sure, dominate that market in Austria and take a strong share in other footprint markets.

For other application categories, such as automotive or transport & logistics, geographical coverage is vital. Of course MNOs have access to roaming deals (although in some prominent cases these have been withdrawn for M2M by some cunning MNOs) but these have two drawbacks: (i) they cost more, which may matter depending on the application and its margins; and (ii) it's not as easy for the service provider to support their clients without 100% transparency of the network elements.

It is also important to note that M2M is not a stand-alone service. It tends to be provided to companies that are also wider corporate customers (and important ones at that) of the telco. Failing to provide an M2M service could have implications for the wider ability to sell to verticals. If TA fails to support the M2M requirements of its major customers, and in particular large corporates based in Austria, then it may lose them as customers to the likes of Vodafone.

This raises an interesting issue. Mobilkom Austria is a Vodafone partner operator. In M2M these partner players offer VF the ability to extend their reach into non-footprint markets, often with great transparency over network elements. Some of the partner operators are supported on Vodafone's GDSP platform. However, I suspect there will be a backlash from these partners simply because Vodafone knows too much about their customers and operations. The solution for Vodafone is fairly simple though. They need to hive off the GDSP platform into a separate company (a la Jasper Wireless). This will allow them to support third party carriers (such as TA) without TA fearing for its wider corporate customer base.

We at Machina Research will be exploring this and many similar issues in our M2M Benchmarking Study which will compare the capabilities of major CSPs across the world in providing M2M solutions.

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